American Airlines has delayed the rollout of a controversial new system for awarding AAdvantage miles and Loyalty Points.
But the changes are still coming.
What’s next? In plain English, American Airlines will cut earnings for miles and Loyalty Points on some nondirect bookings made with certain travel agents and other third-party sellers.
American wants to reward only those travelers who book through American Airlines directly or through its “preferred” booking channels. That means some travelers won’t receive points or miles for their flights.
American confirmed it’s delaying the rollout until July 11.
“This extension gives an opportunity for those agencies to complete the transition,” American said in a statement to TPG. “We’ll continue to work closely with travel agencies to support them through this transition for our mutual customers.”
It’s part of a broader move by American to get repeat customers and gain more control over those new customers. American has already been aggressive in getting AAdvantage members to use its cobranded credit cards and make more of their purchases through American-controlled channels like the AAdvantage shopping portal.
Not everyone is happy with the changes.
“Ironically, the segment of traveler that might be hit the hardest here are those who travel for business, the high-spending business the airlines rely on to make money,” said Tim Jue, a San Francisco-based aviation and travel reporter.
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Smaller corporate travel booking providers and some travel agents might not yet be ready in time to adopt the new system. That means some of those flyers won’t earn miles or Loyalty Points on tickets bought for business.
Jue noted that many businesses use third-party agencies to book their travel; there’s a great degree of uncertainty about whether those agencies will fall under American’s “preferred” status where you can actually earn miles, “… which to everyone I know who flies for business, a major perk.”
“Direct-to-consumer sales in the airline business aren’t new, but this quite an aggressive push to control the distribution of the American product,” Jue said.
Johnny Jet founder and editor-in-chief John E. DiScala echoed this sentiment.
“I think American Airlines is out of their minds,” he said.
“Oftentimes, a corporate client buys me a high-priced, business-class ticket, but if they’re not going to count those miles, you can bet I will be switching carriers just like all the other travelers who have to use third parties to book tickets,” DiScala said. “If American Airlines goes through with this, they’re essentially giving Delta and United the greatest early Christmas gift ever.”
Some industry observers offered a different view.
“I think it’s smart,” said Henry Harteveldt, a travel industry analyst and president of Atmosphere Research.
“Later may actually be better. I think this is a sign of victory and not defeat. And that’s because American is hearing from travel agencies that they want to get on board with this new NDC distribution technology and that American must be seeing enough travel agencies getting to a critical mass … to say we’re going to postpone the launch date.”
It’s still not known exactly who will be considered preferred, but it’s likely to include online travel agents like Expedia and Priceline, who use that fairly new technology: New Distribution Capabilities or NDC.
NDC is a software developed by the International Air Transport Association — the trade group for the world’s airlines. NDC technology allows airlines to retail fares and other products in a more consumer-friendly way. It’s been in development for a decade, according to Harteveldt.
American has already rolled out highly specific booking options via its own website. I can be specifically targeted as a customer since American has so much information about me as a traveler.
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American Airlines booking options. AMERICAN AIRLINES
“For example, airlines just sell fares right now,” Harteveldt said. “They may have a lot of different fares, not just inventory buckets, but NDC will allow for an airline to use its customers’ data like loyalty status, corporate travel agreements and previous purchase history to create various offers ranging from a bare-bones price without a seat and without flexibility and no miles or it could be a fare that includes a seat and one or more products.”
Harteveldt said that if AA is seeing evidence that agencies are spooling up in terms of sales using NDC, it’s a win all around.
“A win for the travel agencies and travel management companies, it’s a win for American because it means more may use this new preferred distribution technology and it’s a win for shared customers because it means that the travelers won’t have to change travel agencies if their agency wouldn’t be approved,” he said.
American’s comments about the delay mirrored this idea.
“Customers are at the center of what we do,” the airline said. “American is evolving to give our customers the travel management experience they have come to expect, and we’ve invited the industry to come along with us. We’ve seen a great response from agencies increasingly adopting modern retailing technology and many have already achieved preferred retailer status.
Still, Harteveldt acknowledged this strategy is not without danger for the airline.
“American is still taking a risk. They risk shooting themselves in the foot,” he said.
He pointed out that AA has already reduced the available booking channels by some 40% and is more focused on the leisure market right now.
There is a risk that American could alienate some of the big business travelers the other airlines are more focused on.
“What I like is that American is looking at the data, listening to the market and said OK, we’re going to be flexible here. American deserves credit for that. I promise you that other airlines are looking at how this plays out,” Harteveldt said.
Jue agreed: “I strongly suspect other airlines will follow in American’s footsteps and implement similar changes, so let’s see what happens.”
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